After the 1996 election, and as a small part of the deal whereby New Zealand First went into government with National, the Policy Targets Agreement governing monetary policy was amended. The first section now read, adding the text I’ve underlined.
1. Price Stability Target
Consistent with section 8 of the Act and with the provisions of this agreement, the Reserve Bank shall formulate and implement monetary policy with the intention of maintaining a stable general level of prices, so that monetary policy can make its maximum contribution to sustainable economic growth, employment and development opportunities within the New Zealand economy.
Going into that election, New Zealand First had campaigned for material changes to the way monetary policy was run. What it got was an increase in the target range (from 0 to 2 per cent, to 1 to 3 per cent) and those new words. Inside the Bank, we…
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